A Simple Model of Intertemporal Price Discrimination

Many products are sold in identical form at different times and at different prices. Motion pictures are shown at most movie theaters at full price for weeks after initial release, after which they may be shown in bargain theaters for a much lower price. Upon initial release, compact discs are sold at retail outlets for a high price and several months later may be available through music clubs at significantly lower cost. Book clubs and movie clubs offer similar arrangements. At all times of release, each of these products is identical. The only difference is the time at which each release is available to the consumer. Waiting for the later release of any of these products, therefore, may involve a time cost. This opportunity cost may differ among consumers depending on their attitudes regarding waiting to purchase a product.